Ratan Tata: Leading the Tata Group into the 21st Century

by M
on July 13, 2013
in Business, Management
with Comments Off on Ratan Tata: Leading the Tata Group into the 21st Century

The Tata group, alongside Reliance and Birla conglomerates, is a household name in India. The group had risen to this prominence through its enterprising, innovative and ethical leadership over the course of more than a century. First under the auspices of Jamshetji Tata and later under the inspirational leadership of J.R.D. Tata, the group has earned its fame through the management ethos that is passed from one generation to the next. Since 1993, Ratan Tata, the nephew of J.R.D. Tata assumed the top leadership position for the group. And in the 17 years of his leadership, the group has ascended new heights and looks set to continue in this vein in the immediate future too. This essay will critically discuss the leadership of Ratan Tata and evaluate his successes and failings by setting them in right context. The essay will also attempt to identify areas where the Tata group lags behind and propose measures to improve those.

The year 1993 when Ratan Tata took over the reigns of one of India’s largest conglomerates is a crucial time for the country as a whole. It was two years before, in 1991, that the Congress government, under the leadership of Narasimha Rao, made a radical policy move that would change the complexion and dynamics of the Indian economy. Prior to 1991, Indian economy was highly protectionist, with a regulatory framework that was indifferent to business interests. In the competition between the public sector and private sector, the former always held an edge. And some of the private sector enterprises too reflected the lethargy and incompetence of the public sector. Even amid the major business houses, the Tata group had garnered notoriety for representing this form of work culture and attitude. So Ratan Tata was met with two major challenges: the first is to adapt the group to the changing economic environment and secondly to change the work culture of his own organization (Case 10, Center for Management Research, 2008). And after seventeen years of his role at the top, there is measurable progress in both these areas. And as a result of that, despite how successful his leadership would be in coming years, his legacy as a stalwart leader is already assured.

In his early days as Chairman, Ratan Tata had to confront issues of power politics within the organization. For example, many of the individual companies and subsidiaries functioned as independent entities, without reflecting the core values and principles of its founders. This lack of cohesion manifested in the form of CEOs clinging on to their position way beyond reasonable tenure, thereby thwarting opportunities for the next generation of managers. Ratan Tata’s initiative to turn around this situation was met with stiff opposition from below, but he stood by his principles and managed to shake up the top management of the group in a matter of few years. This result proved to be a beneficial one, as the newly appointed managers were better equipped to utilize business opportunities created in the neo-liberalization era. The inefficiencies and quality issues that were commonplace previously, were set right under this program of leadership change. So Ratan Tata truly deserves appreciation for readying Tata group to embrace globalization under the neo-liberal policy framework. (www.economist .com, 2007)

Ratan Tata also has to be credited for making the conglomerate trimmer and fitter by pulling out of businesses that were unwieldy and unprofitable. At the same time, the Tata group expanded into new industries such as Information Technology and Telecommunication, where it has been very successful. Hence Ratan Tata’s legacy will not be for pulling out of certain businesses, but for venturing into new business domains as well. And behind this change in the composition of the conglomerate is the philosophy of risk espoused by Ratan Tata. For example, in his own words,

“You can be risk averse and take no risks, in which case you will have a certain trajectory in terms of your growth. Or you can, while being prudent, take greater risk in order to grow faster. I think, as a Group, we were risk averse and we hardly grew because either it was not safe or no one else had done it before. I view risk as an ability to be where no one has been before. I view risk to be an issue of thinking big, something we did not do previously. We did everything in small increments so we always lagged behind.” (Case 10, Center for Management Research, 2008)